Japanese MBOs and parent-subsidiary listings
It is proving to be a very busy year for Asia-Pacific M&A, with the number of deals on track to exceed 300, comfortably exceeding the previous peak of 242 (figure below). Hong Kong, Singapore and Japan have shown the greatest leaps in activity, with run rates of 3.5x, 3.0x and 2.1x the post-2009 average, respectively. ... more
Looking ahead
Event-driven outlook
We begin 2025 with a survey of current opportunities in Metrica’s core strategies.
Firstly, in the event-driven (hard catalyst) strategy, one of the key performance drivers is the liquidity of the target universe, as it correlates with the frequency and depth of trading opportunities. ... more
Vigilance is required
The start of the year has already brought five $100 million-plus Japanese takeovers, representing a decade-plus high for the month of January. It contrasts with a 36% year-on-year slowdown in global M&A. What is behind the uptick? ... more
Record Q1 for M&A
M&A activity in Asia-Pacific is trending at a post-GFC record:
Several drivers exist in our view: ... more
Implications of bear steepening
Interest rates are in focus, with long-term Treasury yields rising steadily, the curve steepening and implied volatility moving higher.
We have previously considered the effect of these trends on equity relative value performance. How about the impact on corporate merger activity? ... more
Deal activity still resilient in Asia-Pacific
Recent headlines such as “With M&A Hit, Wall Street Bankers Keep Busy With Stock Sales” (Bloomberg, 28 May), “Bankers fear sustained M&A slump: ‘It’s impossible without face-to-face meetings’” (Financial News, 8 June) and “Pandemic fears grip M&A as deal making slumps to 23-year low in Europe” (MarketWatch, 30 June) suggest a very depressed market for corporate transactions this year.
However, the numbers in Asia-Pacific tell a different story: ... more
June update: which market has the fastest growth in new deals?
Transaction volumes continue to trend at high levels across the region. The chart below shows deal announcements this year (annualised) compared with the average since 2006:
One market stands out in particular: ... more
Current trends in Asia-Pacific M&A
The figure below shows the cancellation / completion ratio of Asia-Pacific deals going back twenty years. The chart shows how this year has been a huge outlier, with the ratio moving well above two times, compared with a historical range rarely exceeding one. In other words, in 2020, more than two deals have been cancelled for every deal that has completed. This indicates the scale of the disruption in the M&A space this year.
M&A cancel / complete ratio (x) What does this imply for M&A investment returns for the rest of the year? We think they will be strongly positive for the following reasons: ... more
A perfect storm
- Earnings are falling precipitously. Acquirers are calling off deals by invoking Material Adverse Change (MAC) clauses. Many transactions have either broken or widened out to spreads of 30% to 70%.
- Even less-risky deals are seeing much wider spreads due to forced de-leveraging. For example, we saw annualised returns in Japan which have been around 2-3% for months blow out to 40%+ at one point.
The disruption in the M&A space has been more severe than during the GFC, as this time the correction has been stunningly abrupt. ... more